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The China investment treaty is not as ‘treacherous’ as some fear

Junsai Zhang, ambassador of the People's Republic of China to Canada, attends a business luncheon in Montreal hosted by the Montreal Council on Foreign Relations in February.Photo: Dave Sidaway/The Montreal Gazette/Files

Notwithstanding our placid reputation, Canadians sure can be a morbidly obsessed bunch. Not a year or two passes without the death of Canada being pronounced on some account or other. Free trade, needless to say, was the death of us, as was the GST. To eliminate the deficit, a campaigning Jean Chretien once warned, would surely lead to civil war or revolution, as indeed his government was to prove. Separatists in Quebec have killed us several times over.

So I suppose one shouldn’t be surprised at the near-suicidal wailing that has lately erupted over, of all things, a bilateral investment treaty — a treaty that has ample precedent in international law; that enjoins us to do no more than we are doing already; and all with respect to a relatively minor investor in this country.

I speak, of course, of the recently signed Foreign Investment Promotion and Protection Agreement with China. Or, as it has been described, the “secretive, potentially treacherous deal” that “could cripple Canada,” rife with “grave and sweeping implications for Canada’s sovereignty, security and democracy.” That deal, the day of whose ratification would be the day “we lose Canada to China.”

To be fair, those are all from a single source, the Green Party of Canada and its leader, Elizabeth May. Indeed, for all the excitement the deal has occasioned among anti-globalization activists and online petitioners, it has encountered noticeably little opposition among the, you know, opposition. To be sure, the NDP has lately — very lately — taken to advertising its distaste, but in quite perfunctory terms, seemingly aimed more at covering its Green flank than anything else.

The party leader, Tom Mulcair, was widely reported to have said an NDP government would revoke the agreement: In fact what he said was “we will revoke this agreement if it is not in the best interests of Canadians” [emphasis added]. As for the Liberals, they have restricted their concerns to the lack of “debate” and “transparency” surrounding the deal — which is only appropriate, since it was a Liberal government who launched the whole thing, way back in 1994.

That was 18 years ago. From that time to this, this supposedly Canada-ending agreement has aroused no opposition from the provinces, nor from business groups, nor from labour. Granted, the precise wording was only made public a month or so ago, but the general terms have long been known. How can it be that so few people should have discovered its treacherous potential — apart from May, there’s Maude Barlow, and an associate professor at Osgoode Hall, Gus Van Harten — while trade specialists such as Michael Hart, director of the Centre for Trade Policy and Law at Carleton University, or Daniel Schwanen of the C.D. Howe Institute, give it a pass?

Maybe because it’s not that big a deal. As even its detractors admit, the agreement is not hugely different from the investor protection chapters of NAFTA, or from the two dozen other FIPAs Canada has signed with other countries around the world; where it does differ, as in the provision for closed-door arbitration hearings, it is in line with treaties China has signed with other countries. Indeed, its major undertakings are standard boilerplate in most international trade agreements, including the World Trade Organization.

What does the deal commit us to? In broad terms, both parties agree not to discriminate against or otherwise mistreat each other’s investors. Each agrees to apply no restrictions that it would not apply to investors from other countries (most favoured nation) or, for the most part, to its own (national treatment). And each promises to provide fair compensation in the event it expropriates the other’s assets — which is not only a standard of international agreements, but of our own common and statutory law. It’s one of the things that until now distinguished us from countries like China.

If anything, the deal is rather less sweeping than some others. It applies only to new laws — existing measures are grandfathered — and new investments, all of whom are still subject to the Investment Canada Act. It excludes sensitive sectors such as the cultural industries, and specifically exempts environmental and safety regulations, so long as these are not applied in an “arbitrary or unjustifiable manner,” or as “a disguised restriction” on trade and investment.

Yes, it allows investors to take governments to binding arbitration if they feel these promises have not been kept. That, too, is nothing new. It is part of NAFTA, it is a part of the other FIPAs, and while the attempt to extend these generally through the Multilateral Agreement on Investment failed, governments may take each other to the WTO under the same rules. Sometimes, not often, these decisions go against Canada. News flash: Sometimes they should.

That’s true of many of the critics’ complaints. Provisions of the agreement are breathlessly unearthed as if they were some strange and threatening new idea, in apparent ignorance of our existing obligations under international law — the prohibition on local performance requirements, for example, simply copies in the corresponding provision from the WTO.

Others, presented as self-evident indictments of the agreement, are at best half-issues. It’s probably true, for example, that we did not extract fully reciprocal terms from China. So what? The value of any such deal lies in persuading us to remove protectionist restrictions in our own market; anything we get from the other side is gravy.

As for the complaint that we should not be entering into such a deal because the Chinese invest so much more in Canada than we do there, it is quite frankly bizarre. The total stock of Chinese direct investment in Canada — stock, not flow — stood at $10.9-billion last year: less than two per cent of overall foreign direct investment of $607.5-billion. It is the point of the agreement to bring in more.

A National Post original, Andrew Coyne's journalism career has also included positions with Maclean's, the Globe and Mail and the Southam newspaper chain. In addition, he has contributed to a wide range... read more of other publications including The New York Times, The Wall Street Journal, National Review, Time and Saturday Night. Coyne is also a long-time member of the CBC’s popular At Issue panel on The National.View author's profile